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Hide or show? Endogenous observability of private precautions against crime when property value is private information

  • Baumann, Florian
  • Denter, Philipp
  • Friehe, Tim

This paper analyzes a contest in which defenders move first, have private information about the value of the objects they are trying to protect, and determine the observability of their defense efforts. The equilibrium consistent with the intuitive criterion depends on the distribution of defender types, the magnitude of the difference between defender types, and the asymmetry between defender and aggressor regarding the valuation of the objects at stake in the contest. Our setting captures key characteristics of the interaction between households and thieves, focusing on the classic distinction between observable and unobservable private precautions against crime. An analysis of welfare implications determines that a setting in which information about the value of the protected objects is private results in a better outcome than a complete-information scenario.

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 115.

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Date of creation: 2013
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Handle: RePEc:zbw:dicedp:115
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  1. Shavell, Steven, 1991. "Individual precautions to prevent theft: Private versus socially optimal behavior," International Review of Law and Economics, Elsevier, vol. 11(2), pages 123-132, September.
  2. Hoffmann, Magnus & Rota Graziosi, Gregoire, 2010. "Endogenous Timing in General Rent-Seeking and Conflict Models," MPRA Paper 24084, University Library of Munich, Germany.
  3. Baumann, Florian & Friehe, Tim, 2013. "Private protection against crime when property value is private information," International Review of Law and Economics, Elsevier, vol. 35(C), pages 73-79.
  4. Kai A. Konrad & Wolfgang Leininger, 2005. "The generalized Stackelberg equilibrium of the all-pay auction with complete information," Discussion Papers in Economics 05_07, University of Dortmund, Department of Economics.
  5. Warneryd, Karl, 2003. "Information in conflicts," Journal of Economic Theory, Elsevier, vol. 110(1), pages 121-136, May.
  6. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
  7. Gintis, Herbert, 2007. "The evolution of private property," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 1-16, September.
  8. Philip J. Cook & John MacDonald, 2010. "Public Safety through Private Action: An economic assessment of BIDs, locks, and citizen cooperation," NBER Working Papers 15877, National Bureau of Economic Research, Inc.
  9. Hotte, Louis & van Ypersele, Tanguy, 2005. "Individual Protection Against Property Crime: Decomposing the Effects of Protection Observability," CEPR Discussion Papers 5293, C.E.P.R. Discussion Papers.
  10. Ben-Shahar, Omri & Harel, Alon, 1995. "Blaming the Victim: Optimal Incentives for Private Precautions against Crime," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 434-55, October.
  11. Florian Baumann & Tim Friehe, 2010. "Product liability and the virtues of asymmetric information," Journal of Economics, Springer, vol. 100(1), pages 19-32, May.
  12. Morgan, John, 2003. " Sequential Contests," Public Choice, Springer, vol. 116(1-2), pages 1-18, July.
  13. Clotfelter, Charles T, 1977. "Public Services, Private Substitutes, and the Demand for Protection against Crime," American Economic Review, American Economic Association, vol. 67(5), pages 867-77, December.
  14. Konrad, Kai A. & Leininger, Wolfgang, 2007. "The generalized Stackelberg equilibrium of the all-pay auction with complete information," Munich Reprints in Economics 22092, University of Munich, Department of Economics.
  15. Hui-Wen, Koo & Png, I. P. L., 1994. "Private security: Deterrent or diversion?," International Review of Law and Economics, Elsevier, vol. 14(1), pages 87-101, March.
  16. Qiang Fu, 2006. "Endogenous timing of contest with asymmetric information," Public Choice, Springer, vol. 129(1), pages 1-23, October.
  17. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
  18. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  19. Clotfelter, Charles T., 1978. "Private security and the public safety," Journal of Urban Economics, Elsevier, vol. 5(3), pages 388-402, July.
  20. Keith N. Hylton, 1996. "Optimal Law Enforcement and Victim Precaution," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 197-206, Spring.
  21. Denter, Philipp & Morgan, John & Sisak, Dana, 2011. ""Where Ignorance is Bliss, 'tis Folly to be Wise": Transparency in Contests," Economics Working Paper Series 1128, University of St. Gallen, School of Economics and Political Science.
  22. Barros, Fatima, 1997. "Asymmetric information as a commitment in oligopoly," European Economic Review, Elsevier, vol. 41(2), pages 207-225, February.
  23. Lacroix Guy & Narceau Nicolas, 1995. "Private Protection against Crime," Journal of Urban Economics, Elsevier, vol. 37(1), pages 72-87, January.
  24. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
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